The Pacific Alliance hosted meetings from the Ministers of Finance and the High-Level Group this week. What progress did they make?

During the XVI Meeting of Ministers of Finance, which took place in New York, they agreed to explore the option to issue a new catastrophic bond to cover risks of floods and droughts. This initiative is well received after the successful issuance of  CAT Bonds to cover earthquake risks last February.  The Pacific Alliance is also working on an agenda towards financial inclusion. Members agreed on the development of common criteria/standards for Fintech Regulation to promote these kinds of activities. They also reported some progress on the implementation of the Pacific Alliance Infrastructure Fund.

On the 24th of April 2018, the Deputy Ministers of Trade and Foreign Affairs held a virtual meeting to discuss the awaited 2030 Strategy for the Pacific Alliance, the entrance of the four associate members, and the next presidential meeting to take place in July. However, not much else is reported on the content and scope of this strategy and proposals are not publicly available for consultation on their website or through other means.

In the meantime, other regional players continue to explore membership to the Pacific Alliance. This is the case for Ecuador which has expressed interest in joining the mechanism on two occasions.  Whether these intentions are to materialise seem unlikely in the short and even medium term. However, Ecuador’s statement is a strategic geopolitical move by president Lenin Moreno to distance from this predecessor’s foreign policy. With this announcement, Moreno makes the call that he wants to build new alliances during his presidency, ideologically different to the ones made by Correa. He wants to signal a more open and liberal approach to regionalism with the aim to embrace economic and political relations with the Asia Pacific beyond China.

How stable this resolution is as a state policy will be a challenge for Ecuador’s membership acceptance and would certainly test one of the openness features that the Pacific Alliance preaches. Adding a new full member with an unstable foreign policy orientation could prove disastrous for the future progress of a consensus-based intergovernmental mechanism such as the Pacific Alliance.

Sources: Nueva Sociedad; 20minutos.com.mx; alianzapacifico.net
photocredits:@MauricioCard

The presidents of the Pacific Alliance countries had a virtual meeting on May 6 to discuss the Pacific Alliance’s strategy towards 2030 and reiterate the instruction to the ministers to develop such a strategy, according to the Cali Declaration from last year. The presidents emphasised the requirement to propose a concrete plan to increase competitiveness and productivity, to strengthen the integration process and to disseminate the benefits of the PA to its citizens in a more effective way.

An interesting point of the brief declaration is that the presidents clearly spell out the commitment to develop deeper integration and its relation to the free movement of persons, goods, services and capital. The scope of the 2030 strategy is put on the spot by this connection and questions how instrumental it could be in reducing not only barriers to trade but also going beyond in proposing concrete actions towards coordination, regulatory harmonisation, recognition and convergence and the development of regional public goods.

Presidents will meet again on the 24th and 25th of July 2018 when the pro-tempore presidency will be passed on to Peru for a year.

In the meantime, the third round of negotiations for free trade agreements with potential associate states –Australia, Canada, New Zealand and Singapore– was held in Santiago, Chile from March 3rd through to the 9th. Parties reached agreements in the SMEs disciplines, transparency and regulatory improvement, general cooperation, and sanitary and phytosanitary rules.

Negotiators have anticipated that not everything could be negotiated as a bloc and some issues, particularly market access for goods, will require bilateral negotiations. On this occasion, the parties discussed the access offers for goods, services, investment and disciplines for the temporary entry of business people.
The next round of negotiations with associate candidates will be held in mid May in Ottawa, Canada.

Sources: alianzapacifico.net
larepublica.co
Photo by Deniz Altindas on Unsplash

Two developments have taken place in recent days concerning the progress of the Pacific Alliance: first the issuance of cat bonds for earthquake-induced damages. Second, the new round of negotiations with candidates to associate members on the last week of January. We will refer to each of them briefly.
A positive outcome is the release of  Catastrophic bonds to cover the four members against earthquakes with a total coverage of US $ 1.3 billion. The World Bank-IBRD issued the first multi-nation operation on Wednesday 7 February. According to the Bank, this is the second largest issuance of cat bonds in history.

Coverage for Chile, Colombia and Peru will be for three years while Mexicos’ coverage will be two years. The cat bonds issuance is worth celebrating as a clear example of how regional cooperation could contribute to support national capabilities. It is also an expression of the problem-based approach taken by the Pacific Alliance in the aftermath of the intense earthquakes suffered by Mexico in 2017 and Chile in  2015.

The second round of negotiations towards ‘commercial agreements of high standards’ between the PA members as a whole and the four candidates (Australia, New Zealand, Canada and Singapore) took place in Gold Coast, Australia, from the 29 January to the 2 February 2018.

It gathered government officials of the eight countries to discuss disciplines in areas such as: market access on agricultural and industrial products, trade facilitation, rules of origin, sanitary and phytosanitary measures, technical barriers to trade, services, investment, trade remedies, public procurement, cooperation, environment, labour, and institutional matters of the agreements.

The Pacific Alliance closes the year with a busy last week. A couple of significant events took place and deserve some consideration. First the meeting of the technical groups in Bogota from the 11 to the 13 December. Second the presidential election in Chile.

The meeting in Bogota gathered more than a dozen technical groups and subcommittees on issues regarding tourism, gender, institutional matters, digital agenda, education,  regulatory cooperation, innovation, external relations and SMEs. Around 160 government officials from the four countries attended the meeting to discuss progress in the different areas and the action plans for 2018.

The Pacific Alliance had a busy week closing with the Presidential Summit on Friday 1 July where new mandates to guide the progress of the integration mechanism were decided on.

The presidential summit was preceded by meetings of the High Level Group, The Free Trade Commission, The Ministerial Council and the Metting of Ministers of Finance. The IV Business Metting also took place on the 29th June. In addition, the third meeting of higher education institutions of the PA on the 21 and 22 June was an opportunity to discuss the role of the academic and student mobility platform for the integration of the PA countries.

Steps were taken this week on various fronts. First the PA members approved an accord that sets the tax rate on pension funds investments returns at 10 percent. This agreement covering the pension funds from the four members is an effort to boost investment in infrastructure projects while opening up the pool of investment options for these entities within the region. However this is a ceiling rate that will only require implementation by Mexico since Chile and Peru have a rate that is already  5 per cent, while Colombia has a zero per cent rate for pension funds from the PA. In addition, a decision on the creation of a regional infrastructure fund is still pending.

Photocredits: 7Crafts/FreeDigitalPhotos.net
This week the Pacific Alliance Council of Ministers announced the approval of the guidelines for states to become associates of the PA. The move is a response to the persistent interest that some of the observer states have in the mechanism and a push to move forward with economic and political relations with those observer states of ‘higher interest’.

The brief guidelines outline the requirement that, to become an associate state, the candidate should conclude a mandatory economic and commercial agreement with the four PA members that follows ‘high standards‘.  Although the guidelines are rather vague as to what constitutes a high standard agreement it seems to refer to the disciplines that shall be covered, including trade in goods, services and investment. It is also an underlying requirement that the agreement encourages openness and market integration along with its alignment with the general objectives of the PA.

While President Trump has recently withdrawn from the TPP Agreement, not yet ratified, and announced his interest in negotiating on a bilateral basis any commercial agreement, the Pacific Alliance has made an interesting political move.  The PA has called for a meeting to take place 14-15 March in Chile.

The purpose of the meeting is gathering not only foreign affairs ministers of the TPP negotiating parties but also China, South Korea and Colombia. Although no formal commitments are expected from the ministerial summit, it will provide a forum for Asian and PA countries to discuss ways to move forward in the economic front while counter-reacting to the protectionist narrative of recent months in the US.

Photocredits: domdeen/FreeDigitalPhotos.net
President Bachelet has recently expressed particular interest in Argentina becoming a PA member, and as Pro Tempore president of the integration mechanism will devote efforts to this end. Let’s remind us that since the second semester of 2016 Argentina officially became an observer of the mechanism.

However, going beyond the political rhetoric of presidents we need to consider the long-term economic and institutional implications for the PA in this scenario.

Despite efforts by the Argentinian president to signal a change in foreign commercial policy, there is a lot of uncertainty as to whether this is a move reflecting a shift in state policy or rather a short term policy of Macri’s government. Uncertainty on the continuity of this policy after the long lasting protectionist approach of the Kirchner era would not contribute to ensuring stability in this front for the PA. The PA is an integration model that has clearly characterised itself by the alignment of its members regarding commercial foreign policy and development approaches. Changes in unconsolidated state policies by a newcomer such as Argentina could not only slow down the pace but lead to stagnation, as seen in previous integration experiences.

On the other side of the table, Argentina should and will probably focus on putting things in order within Mercosur after Venezuela’s suspension from the integration scheme. This situation triggered a most recent institutional crisis for Mercosur and Argentina’s delegation of the pro-tempore presidency. Joining the PA as a full member would only represent another example of ‘the scape forward approach’ that Latin American governments and states often take towards regional integration.

Finally, I am not sure that with the short length of pro-tempore presidencies within the PA Chile should be investing efforts into extending the number of countries in the PA rather than setting and implementing a work agenda that could strengthen the economic ties and other integration areas within the already existing members. People might say these are not excluding issues but they de facto could be when limited human resources are devoted to performing multiple tasks like is the case in the PA. There is a need to prioritise efforts and areas of work.

The issue could be just part of the rhetoric accompanying the recent presidential visit of Bachelet to Macri, but places on the stage a major missing factor: a clear policy line and criteria regarding new members accession/entry to the PA.

Is the PA ready for the newcomers?

I look forward to your comments on this issue.

Sources: panampost.com

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